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The British pound is likely to rise further against the euro in the near term despite its fall on Tuesday as it is still seen as a safe play, but in the long term it will weaken, according to currency analysts.
The pound fell against the euro and the dollar on Tuesday after UK manufacturing data came in at the weakest since December, when the index was in contraction territory. Analysts had expected the UK economy, which has officially entered a double-dip recession , to strengthen, allowing the Bank of England to shift its focus from growth to inflation.
"In the near term the risk is still on the downside in euro/sterling," John Hydeskov, chief analyst at Danske Bank told CNBC.com.
"We see euro sterling trading around 81 in a three-month horizon with the risk of dipping just below 80. We're talking about fairly narrow range trading," he added.
Behind sterling's strength against the euro in the past several months lies more than just the Bank of England's more hawkish stance in recent meetings, David Bloom, a currency strategist at HSBC wrote in a market note.
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